Article 43


Sunday, December 16, 2007

After The Money’s Gone


After The Money’s Gone

By Paul Krugman
Information Clearinghouse
December 16, 2007

On Wednesday, the U.S. Federal Reserve announced plans to lend $40 billion to banks. By my count, it’s the fourth high-profile attempt to rescue the financial system since things started falling apart about five months ago. Maybe this one will do the trick, but I wouldn’t count on it

In past financial crises - the stock market crash of 1987, the aftermath of Russia’s default in 1998 - the Fed has been able to wave its magic wand and make market turmoil disappear. But this time the magic isn’t working.

Why not? Because the problem with the markets isn’t just a lack of liquidity - there’s also a fundamental problem of solvency.

Let me explain the difference with a hypothetical example.

Suppose that there’s a nasty rumor about the First Bank of Pottersville: People say that the bank made a huge loan to the president’s brother-in-law, who squandered the money on a failed business venture.

Even if the rumor is false, it can break the bank. If everyone, believing that the bank is about to go bust, demands their money out at the same time, the bank would have to raise cash by selling off assets at fire-sale prices - and it may indeed go bust even though it didn’t really make that bum loan.

And because loss of confidence can be a self-fulfilling prophecy, even depositors who don’t believe the rumor would join in the bank run, trying to get their money out while they can.

But the Fed can come to the rescue. If the rumor is false, the bank has enough assets to cover its debts; all it lacks is liquidity - the ability to raise cash on short notice. And the Fed can solve that problem by giving the bank a temporary loan, tiding it over until things calm down.

Matters are very different, however, if the rumor is true: The bank really did make a big bad loan. Then the problem isn’t how to restore confidence; it’s how to deal with the fact that the bank is really, truly insolvent, that is, busted.

My story about a basically sound bank beset by a crisis of confidence, which can be rescued with a temporary loan from the Fed, is more or less what happened to the financial system as a whole in 1998. Russia’s default led to the collapse of the giant hedge fund Long Term Capital Management, and for a few weeks there was panic in the markets.

But when all was said and done, not that much money had been lost; a temporary expansion of credit by the Fed gave everyone time to regain their nerve, and the crisis soon passed.

In August, the Fed tried again to do what it did in 1998, and at first it seemed to work. But then the crisis of confidence came back, worse than ever. And the reason is that this time the financial system - both banks and, probably even more important, nonbank financial institutions - made a lot of loans that are likely to go very, very bad.

It’s easy to get lost in the details of subprime mortgages, resets, collateralized debt obligations, and so on. But there are two important facts that may give you a sense of just how big the problem is.

First, the United States had an enormous housing bubble in the middle of this decade. To restore a historically normal ratio of housing prices to rents or incomes, average home prices would have to fall about 30 percent from their current levels.

Second, there was a tremendous amount of borrowing into the bubble, as new home buyers purchased houses with little or no money down, and as people who already owned houses refinanced their mortgages as a way of converting rising home prices into cash.

As home prices come back down to earth, many of these borrowers will find themselves with negative equity - owing more than their houses are worth. Negative equity, in turn, often leads to foreclosures and big losses for lenders.

And the numbers are huge. The financial blog Calculated Risk, using data from First American CoreLogic, estimates that if home prices fall 20 percent there will be 13.7 million homeowners with negative equity.

If prices fall 30 percent, that number would rise to more than 20 million.

That translates into a lot of losses, and explains why liquidity has dried up. What’s going on in the markets isn’t an irrational panic. It’s a wholly rational panic, because there’s a lot of bad debt out there, and you don’t know how much of that bad debt is held by the guy who wants to borrow your money.

How will it all end? Markets won’t start functioning normally until investors are reasonably sure that they know where the bodies - I mean, the bad debts - are buried. And that probably won’t happen until house prices have finished falling and financial institutions have come clean about all their losses. All of this will probably take years.

Meanwhile, anyone who expects the Fed or anyone else to come up with a plan that makes this financial crisis just go away will be sorely disappointed.


Posted by Elvis on 12/16/07 •
Section Dying America
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Bells Labs .EDU


Bell Labs Is Gone. Academia Steps In

By G Pascal Zachary
NY Times
December 16, 2007

PAY me now, and pay me later.

Thats the new mind-set at some leading research universities in dealing with business - and the essence of an emerging model for how corporations can tap big brains on campus WITHOUT HAVING TO PAY their salaries.

Corporations have long been able to license intellectual property from universities, but these deals are cumbersome to negotiate and tend to work best when corporate researchers know exactly what they need to create.

They don’t always. Often, they explore scientific and technological frontiers without a map. After blue-sky thinking and random experimentation, they build new products without relying on neatly defined patents or published scientific papers - the bread-and-butter of academic knowledge production.

In the bygone days of innovation, large corporations like RCA, Xerox and THE OLD AT&T - maintained internal laboratories like BELL LABS. These corporate labs were essentially research universities embedded in private companies, and their employees published academic papers, spoke at conferences and even gave away valuable breakthroughs. Bell Labs, for instance, created the worlds first transistor after World War II - and never earned a dollar from the innovation.

Almost NO CORPORATE LABS BASED ON THE BELL OR XEROX MODEL REMAIN, victims of cost-cutting and a new appreciation by corporate leaders that commercial innovations may flow best when scientists and engineers stick to business problems.

The obsession with marrying research and markets, while generally a strength of American capitalism, leaves some needs unmet. To fill them, “companies need boots on the ground at universities,” says Henry Chesbrough, a business professor who studies innovation at the University of California, Berkeley.

A vanguard group of universities is giving corporations greater access to ivory-tower laboratories for a price. Stanford has paired with Exxon Mobil in a deal worth $100 million over 10 years. The University of California, Davis, is getting $25 million from Chevron. And Intel has opened collaborative laboratories with Berkeley, the University of Washington and Carnegie Mellon.

The appeal of these arrangements is that “we get broad engagement with universities,” says Andrew A. Chien, Intel’s director of research. “Their researchers work on frontiers, in unexplored territory. We want explorers.”

Intel hopes to learn more about scientific and technical developments that might influence its business, even decades from now. The company says it benefits from having its own employees rub shoulders with professors, while gaining the chance to observe younger talent in Ph.D. programs.

“You can view this as a pure pipeline,” says Mr. Chien, himself a former professor.

Jean Stephenne, president of the vaccine division of GlaxoSmithKline, the pharmaceutical company, says “university partnerships with corporations will grow because technology is changing so rapidly.” Even if companies have the resources to finance their own research and identify the right academic problems to tackle, they usually don’t have the time to assemble a staff to pursue these problems. Without help from university professors, Mr. Stephenne asks, “How can we cope?”

Some people doubt that formal partnerships between corporations and universities can deliver real benefits.

Universities don’t innovate, says Curtis R. Carlson, chief executive of SRI International, a nonprofit research institute in Menlo Park, Calif., that bought what remained of RCA’s lab. Innovation means you get it out so people can use it. The university is not going to take it to the world.Ӕ

But corporations hope that universities can help them take innovations to the world faster and more efficiently. Last month, BP pledged to spend $500 million over 10 years on alternative-energy research to be carried out by a new Energy Biosciences Institute at Berkeley, which will manage work done at a nearby Department of Energy lab and at the University of Illinois at Urbana-Champaign.

This is a new model we’re working through in real time, says Robert J. Birgeneau, the chancellor of Berkeley.

CRITICS of corporate-university partnerships fear limits on academic freedom or, worse, that companies might censor results that go against their interests. The risk of such interference seems small, however. Despite the large amount being offered by BP, the money will be divided three ways; of BerkeleyԒs annual research budget of $500 million (nearly all from the federal government), BP will be contributing less than 3 percent.

Under the terms of the partnership, meanwhile, Berkeley professors are free to publish results of BP-funded research. The university also will own the rights to any resulting intellectual property. BP would even have to license that intellectual property, though payments are capped and the company would get the first look at promising results.

The alternative to corporate funds is for universities to rely even more on government funds. And that raises parallel issues in the minds of some academics. “The idea that government funding plays no role in prioritizing research is completely at odds with reality,” says Michael Crowe, the president of Arizona State University.

The marriage of corporations and university researchers is still in its early days. In the decades ahead, we will see more differentiation among universities in how they go about doing this,Ӕ Mr. Crowe says.

For universities, no matter what models emerge, the key is to deliver benefits to society and business.

Will these partnerships produce products you wonӒt get from two people in a garage? Mr. Birgeneau asks. “We dont know that yet. It is an important question.”

G. Pascal Zachary teaches journalism at Stanford and writes about technology and economic development. E-mail: .


Posted by Elvis on 12/16/07 •
Section General Reading
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Controlling the Planned Collapse


By Peter Chamberlin
Information Clearinghouse
December 16, 2007

Just because the COLLAPSE is PLANNED doesnt mean that it can’t be resisted. In resistance, perhaps we can hone-off the roughest edges of the unfolding transformation. The argument made, that resistance is futile, ignores the human potential in a battle situation, where everyone is fighting for their freedom and their lives. We have no duty to mankind to lie down before those who would trample over us. Id prefer that this Nation not continue to submit to the corporate “gang rape” that we have been getting for so many decades. To surrender to the evil men who were instrumental to the ongoing collapse of the global systems misses the point, that it is time for a real political fight in this country. Everything depends upon our ability to shake loose the perverting forces of ultimate capital from government, where they manipulate everything American, causing the failure of democracy. We have to fight a war of IDEAS TO TAKE BACK that which has been stolen from us. We the People must be the ones to set the foreign policy of this country. 

American monopoly capitalists have effectively gained controlling interest in this country. They have made the decision to destroy America’s economic base to obtain greater profits. We have been written off. Studies like “Changing Images of Man” documentthe common knowledge of the ruling class, that there will be social upheaval in reaction to the collapse. It is our duty in the resistance to thwart their plans, to shape the social critical mass so that it has a direct negative impact on the masters of the universe. Our task is to take measures before the collapse that will ensure that the upheaval will destroy the elites ability to control the changed world. We are the patriot radicals (with the extremist beliefs about conspiracies allayed against our nation) who intend to prevent the bringing about of a “dark age of oppression in America. “

The government has planned for the coming period of collapse and social upheaval in this country, but it has done nothing to prevent them from happening. If economic pain and dislocation are allowed to cause insurrection in this country, they will justify police state actions to maintain order. Why would government try to avoid the one catastrophic event that will make dictatorship possible? The catastrophic is essential to the long-term plan, just as the neocon Project for a New American Century war plans needed the catastrophic event of 9/11 to set the war on terrorism plot against freedom into motion.

The American patriotic forces of freedom must likewise prepare for the coming disastrous event that will justify all radical changes. The attack upon Iran will be the event of justification. When the attack comes, those of us who dare to speak out will be silenced in the repercussions at the beginning of the counter-revolution. If we want to ensure that the government returns to the hands of the American people after the dust settles, then we will set in motion now, the political forces that will motivate the leaderless masses in the direction of freedom. All our efforts to prevent the world war from erupting must clearly identify the elite perpetrators of the plot to undermine national security for internationalist goals. Using their own words, we must expose their intentions for America and the world. We must guarantee that the coming democratic revolution which they plan to capitalize on is a patriotic revolution to save democracy.

The intentional de-industrialization of America has amounted to a war of economic terrorism, waged upon the people of this country. The globalist plot to “offshore” all of America’s good jobs and to exploit Third World slave labor conditions, has purposely destroyed the industrial base of this country. Globalism is a plot against American workers (and all workers), just as neoconservatism is a plot against all Americans.

Instead of stimulating our industry to use our economy as a powerhouse, to drive the world economy and to provide the basic necessities needed in developing countries, the masters of the universe, instead decided to destroy the American economy, in order to level the playing field with the rest of the world. Instead of strengthening America by making our foreign policy an engine of humane change, vulture capitalists have intensified the corporate American rape of the world and HARNESSED US to a violent Zionist policy, intent on remaking the Middle East, as a first step into the New World Order. It is high time that we began to wage peaceӔ on the world, instead of war.

In order to implement their violent plans and to shape the second American revolution, the corporate media has consistently bombarded the people with psychological warfare, to convince us of the hopelessness of our situation. Our minds are poisoned with false beliefs in the inevitability of our fates, that we are, in fact, WITNESSING the end of the world. Even though most available evidence suggests that the entire world is collapsing (not just America and Western civilization), there is also ample proof that this is an ENGINEERED EVENT, made to SEEM LIKE Armageddon.

We have been duped into accepting their terms, even using their terminology, by focusing on global issues, instead of American issues. America may be the source of most of the worlds troubles today, but it is also the world’s only hope. If not for American leadership, there would be no world leaders. What the world needs now is the end of American misleadership and a return to the real thing. Meeting the needs of our crowded planet and repairing the centuries of industrialization run amok will calm most of the earths turmoil, while helping us to prepare for the next phase in human development. Once we begin to turn the planet around, we can focus on expanding mankind’s horizons and ending the era of hydrocarbon fuels.

Americans must save themselves from the worst and the most powerful men among them. We must revitalize our moral center, the part that made us a light unto the nations. If America can remember its basic concern for all human life that led to the creation of the worlds largest human aid programs and its environmental concerns that made us signatories to countless international treaties, it can foster international recognition of universal human rights and a reverential respect for all life. This would honor one of the stipulations from the Images of Man study, to FOSTER A NATIONAL SPIRIT that embraces the growing religion of life that is emerging within man.

A MORALLY TRANSFORMED NATIONAL SPIRIT will be necessary for the political fight to reclaim America. We must restore the people’s government by removing the corruption within it. It is time to really clean the peoples house. WE HAVE NO OTHER CHOICE but to establish a “politics of righteousness” in American politics.  We have to end the age of the politics of money right now, *not after* Bush or the next election.

It is high time that we all fought for what we believed in. What do you believe in?


Posted by Elvis on 12/16/07 •
Section American Solidarity • Section Dying America
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New Immigrants


Here’s ANOTHER compelling piece against CONTROLLING OUR BORDERS, that hit me in a chain letter today.  Not compelling enough though.


July 26, 2006

On 31 March 2006, the ORANGE COUNTY REGISTER (California) published several LETTERS to the editor dealing with the subject of the immigration debate. One of those letters, by a reader named Ernie Lujan, was published under a heading of “Tear down lady liberty” and read as follows:

Illegal immigrants have been around since the early 1900’s, except then they entered through Ellis Island in New York City. They came from countries such as Italy, Ireland, Germany, Poland and France. And now we accept them as true Americans.

Now these people whose ancestors came to this country to make a better life for themselves and their children want to build a great wall along the U.S. and Mexico border and deny these hard-working people the same rights that their ancestors fought so hard and died for.

If you build this wall then you must also tear down the great Statue of Liberty that sits in the New York Harbor.

Apparently another Register reader penned a rebuttal to some of those immigration debate letters, one which was not published by the newspaper and has instead been “printed” by her husband through the expedient of forwarding it via e-mail (where it was circulated under the title of “New Immigrants").

Dear Editor:

SO MANY LETTER WRITERS have based their arguments on how this land is MADE UP OF IMMIGRANTS. Ernie Lujan for one, suggests we should tear down the Statue of Liberty because the people now in question aren’t being treated the same as those who passed through Ellis Island and other ports of entry.

Maybe we should turn to our history books and point out to people like Mr. Lujan why today’s American is not willing to accept this new kind of immigrant any longer. Back in 1900 when there was a rush from all areas of Europe to come to the United States , people had to get off a ship and stand in a long line in New York and be documented. Some would even get down on their hands and knees and kiss the ground. They made a pledge to uphold the laws and support their new country in good and bad times. They made learning English a primary rule in their new American households and some even changed their names to blend in with their new home.

They had waved good bye to their birth place to give their children a new life and did everything in their power to help their children assimilate into one culture.

Nothing was HANDED TO THEM. No free lunches, no welfare, no labor laws to protect them. All they had were the skills and craftsmanship they had brought with them to trade for a future of prosperity. Most of their children came of age when World War II broke out. My father fought along side men whose parents had come straight over from Germany , Italy , France and Japan . None of these 1st generation Americans ever gave any thought about what country their parents had come from. They were Americans fighting Hitler, Mussolini and the Emperor of Japan. They were defending the United States of America as one people. When we liberated France, no one in those villages were looking for the French-American or the German American or the Irish American. The people of France saw only Americans. And we carried one flag that represented one country. Not one of those immigrant sons would have thought about picking up another country’s flag and waving it to represent who they were. It would have been a disgrace to their parents who had sacrificed so much to be here. These immigrants truly knew what it meant to be an American. They stirred the melting pot into one red, white and blue bowl.

And here we are in 2006 with a new kind of immigrant who wants the same rights and privileges. Only they want to achieve it by playing with a different set of rules, one that includes the entitlement card and a guarantee of being faithful to their mother country. I’m sorry, that’s not what being an American is all about. I believe that the immigrants who landed on Ellis Island in the early 1900’s deserve better than that for all the toil, hard work and sacrifice in raising future generations to create a land that has become a beacon for those legally searching for a better life . I think they would be appalled that they are being used as an example by those waving foreign country flags.

And for that suggestion about taking down the Statue of Liberty, it happens to mean a lot to the citizens who are voting on the immigration bill. I wouldn’t start talking about dismantling the United States just yet.

(signed) Rosemary LaBonte

This piece provides an apt illustration of the phenomenon that one can find in nearly every culture, in every era, a group of people who firmly believe that their civilization once experienced a golden age in which social conditions were much better (if not perfect), and modern society is an increasingly worsening corruption of that arcadian past. The trend continues today, as we commonly see responses to social, political, or economic issues that attempt to contrast the present with earlier eras, to hearken back to times when such problems were significantly amerliorated or simply did not exist. Generally such reactions don’t ring true, referring not to the way things really used to be, but to idealized, mythical visions of the past couched in absolute terms. So it is with this letter, which attempts to contrast the “modern immigrant” with immigrants of a century ago, finding the former sadly lacking by comparison. As usual, it references a black-and-white past that never existed. [My elderly mother doesn’t agree with you. ed.]

Yes, many of the immigrants who streamed through Ellis Island into the United States around the turn of the century worked hard, obeyed the laws, did their best to learn English (and otherwise become assimiliated into American culture), raised children who willingly took up arms to defend their adoptive country in times of crisis, and made their way in the world (and perhaps even prospered) with little or no help from the government or anyone outside their immediate families and circles of acquaintances. However, plenty of immigrants in that same era did not fit that mold, such as those who:

Resorted to scams, petty theft, and all sorts of other crimes to get by, or simply resumed the same kinds of criminal activities they’d been perpetrating in their homelands, sometimes on large, organized scales (e.g., the Italian mafia, Chinese triads).

Moved to enclaves or communities in which their original cultures and languages were preserved, obviating the need for them to ever assimiliate into the broader American culture or learn English. (If the immigrants of earlier eras “stirred the melting pot into one red, white and blue bowl,” then who started all the ethnic enclaves, such as Little Germany and Chinatown, found in New York and many other American cities?) Their children (and future generations) were often left to learn English and assimilate as best they could on their own, driven by necessity rather than allegiance to American national ideals.

Retained their original family names, or changed their names only reluctantly the latter not to “blend in with their new home,” but to try to escape the prejudices, persecution, and violence typically visited upon members of various national, ethnic, and religious groups in the U.S. (e.g., Catholics, Jews, Irish, Italians).

Declined to participate in fighting for the U.S. against their home countries in World War I (as did their children in World War II), or even left the U.S. to return home and fight for the other side. (And certainly many first-generation Americans of Japanese descent, who found themselves restricted to internment camps merely due to their ancestry, gave plenty of “thought about what country their parents had come from.")

Disdained free lunches, welfare, and labor laws not because they were virtuous and prized self-sufficiency, but because those government programs did not yet exist, either for native-born American citizens or immigrants.

What this piece illustrates is not so much substantive differences between “old immigrants” and “new immigrants,” but rather the truthfulness of the PROVERB “Plus ca change, plus c’est la meme chose.”


Credit: Big Jim

Posted by Elvis on 12/16/07 •
Section General Reading
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An AT&T Age Bias Story

AT&T Not Hiring Retirees-Policy, plus age?

A post from the AT&T Retirees Newsgroup
December 15, 2007

I applied for several jobs with SBC, before they acquired AT&T Corp. They sent email confirmations of those applications and wished me good luck.

I left under the FMP, and remember language in the separation agreement, stating that you could not return work for AT&T Corp. as an employee. The documentis not readily accessible as I type this, so I can’t quote the documentfor accuracy.

At a recent interview for another position at my current employer, I was informed that the UNOFFICIAL AGE CUTOFF for most companies these days is 35 to 37 years.

He mentioned it because the railroads will hire you at almost any age as long as you are qualified and can pass the medical.

Former peers who are three to five years older than me are still looking for work, and have confirmed the age issue. My most interesting brush with this, took place when I tried to get a job with “A” cell phone company. I filled out the application on line and was redirected to another site for BIRTHDATE VERIFICATION.

After doing so, I received an email from them, stating that the job was filled. How about that?




Posted by Elvis on 12/16/07 •
Section Dealing with Layoff
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